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Potential Agreement for Chinese Investment in U.S. Banks

U.S. banks sorely in need of cash infusions and Chinese investors looking for a place to invest their cash may have benefited greatly from President Obama’s trip to China.  According to the South China Morning Post, a deal may be announced in the near future .  An agreement that stimulates rather than limits Chinese investment in U.S. companies marks a departure from recent trends, most notably, the rejection of China National Offshore Oil Company’s [CNOOC] bid for Unocal.

Investments in major businesses or sectors can often have hidden national security implications.  In 1988, Congress passed the Exon-Florio Amendment and created the Committee on Foreign Investment in the United States (CFIUS).  The CFIUS is chaired by the Department of Treasury to review and potentially reject foreign investment in the U.S.  Considering the strong link between the American and Chinese economies, it is no surprise that both countries are investigating innovative approaches towards ending the world economic crisis.  Such an agreement makes even more sense in light of the 123 U.S. bank failures so far in 2009.


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